For rental properties, this is not a straightforward question and getting it wrong could lead to a hefty penalty.

Council Tax was introduced in 1992 as a way for local authorities to fund local services. The amount of tax you pay is calculated by the value of your property. There are eight valuation bands from A to H, with A being the highest.

So who pays Council Tax? For most private rented properties, the Council Tax liability falls to the tenant, however for Houses in Multiple Occupation (HMOs) landlords are liable. In properties where there are two or more tenants living together on a joint tenancy, they will be jointly liable.

As a landlord, you need to ensure the tenancy agreement makes it clear where liability lies. You should notify the council of the name of the tenant(s) and when they moved in. Certain tenants may qualify for exemptions or discounts, but they will have to notify the council of their status.

When the tenancy comes to an end, the liability for Council Tax will revert to the landlord until a new tenant is found.

Owners of HMOs need to do their sums as the rent should take into account the amount of Council Tax. However, if the Council Tax increases, this does not create an automatic right to increase the rent as this can only be done once a year. Landlords can include a term in the tenancy agreement allowing an increase in the Council Tax element of the rent, in line with the Council Tax rise.

HMO rules can differ from one local authority to the next, so it is worth checking with your local council before the tenancy agreement is signed. 

Some properties are exempt from council tax, including substantially unfurnished or recently repaired homes which can be exempt for six months. In addition, a property which is occupied entirely by full-time students or school/college leavers is also exempt – although the students must apply for this exemption.

A single resident can receive a reduction of 25 per cent in their Council Tax bill. Although there may be more than one person living in the property, a single person discount can still apply if the resident is a single parent or if there are full-time students or carers present.

The Council Tax payable on vacant properties will depend on whether or not the property is furnished or unfurnished. On a vacant furnished property, the landlord is liable to pay Council Tax at a discounted rate of up to 50 per cent. However, many local authorities apply a lower discount in order to deter people from keeping properties empty.

A vacant and substantially unfurnished property is exempt from Council Tax for up to six months, following which if it is still vacant the landlord will be liable at the discounted rate of up to 50 per cent.

If you are thinking of investing in a buy-to-let property, call Knight Property Management today on 01992 308181.